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Sheltered workshops, established at the state and local levels, provide both training and employment for the physically and mentally handicapped. GAO was asked to review the role of sheltered workshops in employing the handicapped and operating in the competitive business community. GAO focused primarily on the administration and enforcement of the Fair Labor Standards Act's provisions relating to handicapped workers employed in the sheltered workshops and the administration of the federally sponsored procurement program established by the Wagner-O'Day Act.

The Fair Labor Standards Act authorizes the Department of Labor to issue special certificates to sheltered workshops for employing handicapped workers at wage rates lower than the minimum wage. Special exemptions are needed to prevent possible curtailment of employment opportunities for handicapped workers who are not able to produce at the subminimum wage rate. The majority of sheltered workshop workers are now paid based on their individual productivity and, if the federal subminimum wage requirement were eliminated, the workshops would still be required to base the workers' wages on individual productivity. Elimination of the requirement would permit Labor to simplify the process for certifying the eligibility of sheltered workshops to pay handicapped workers less than the minimum wage. Enforcement of federal labor standards needs to be strengthened. The act's provisions concerning wages based on handicapped workers' individual productivity cannot be enforced by Labor if the resulting wage rate exceeds the statutory minimum. Also, employment opportunities for the handicapped under the program are not adequately evaluated. Federal laws may provide a competitive advantage for sheltered workshops over private businesses. However, the workshops generally incur added costs which may offset the effect of whatever competitive advantages a workshop may receive.

Matters for Congressional Consideration

Status: Closed - Not Implemented

Comments: When we determine what steps the Congress has taken, we will provide updated information.

Matter: Congress should consider amending the Fair Labor Standards Act to extend Labor's authority for enforcing the provision that a handicapped worker's wages must be commensurate with those paid nonhandicapped workers.

Status: Closed - Not Implemented

Comments: There are no plans to introduce legislation because the agency has improved its procedures. The agency notifies contractors it believes would be seriously impacted and those for which the agency does not have information on the contractors' sales.

Matter: Congress should amend the Wagner-O'Day Act to require that the Committee for Purchase from the Blind and Other Severely Handicapped notify directly affected suppliers of the Committee's intent to consider the suitability of a product or service for procurement from a sheltered workshop.

Status: Closed - Not Implemented

Comments: There is no plan to introduce legislation because the agency has improved its oversight of the program. Information is provided to Congress annually through the Office of Management and Budget to show three levels of need: (1) enhanced; (2) current; and (3) minimum.

Matter: Congress should consider requesting the Committee for Purchase from the Blind and Other Severely Handicapped to assess its oversight responsibilities and provide Congress with an estimate of the resources needed for an adequate level of federal oversight.

Status: Closed - Not Implemented

Comments: There are no plans to introduce legislation. The Committee for Purchase from the Blind and Other Severely Handicapped enforces the 75-percent requirement on the basis of the total workshop instead of by the individual service or commodity provided.

Matter: Congress should amend the Wagner-O'Day Act to require that sheltered workshops meet a specific standard for the percentage of handicapped direct labor hours on all commodities produced or services provided under the program. Specifically, the act's 75-percent requirement for measuring a workshop's program eligibility should be adopted as the standard because it appears to provide a reasonable basis for assessing whether the employment opportunities created by the program are used primarily for handicapped workers.

Status: Closed - Not Implemented

Comments: There is no plan to introduce legislation. The statement of purpose of the Committee for Purchase from the Blind and Other Severely Handicapped says that the employment opportunities created by the program should be used to the maximum extent for preparing handicapped persons to engage in competitive procurement outside the workshop.

Matter: Congress should amend the Wagner-O'Day Act to recognize that employment opportunities created by the program should be used, to the maximum extent, for preparing handicapped persons to engage in competitive employment outside the workshop.

Status: Closed - Not Implemented

Comments: A legislative change, H.R. 3091, was introduced on May 23, 1983, to implement this recommendation. The bill did not pass. There has been no subsequent attempt to reintroduce it, and there are no current plans to do so.

Matter: Congress should amend the Fair Labor Standards Act to eliminate the provision that handicapped persons who are employed under special Labor certificates in sheltered workshops must not be paid less than 50 percent of the statutory minimum wage.

Recommendations for Executive Action

Status: Closed - Implemented

Comments: A Supreme Court decision was rendered in the spring of 1985. Under this decision, sheltered workshops operated by state and local governments are covered by the Fair Labor Standards Act.

Recommendation: The Secretary of Labor should decide whether the requirements of the Fair Labor Standards Act should be applied to publicly operated sheltered workshops.

Agency Affected: Department of Labor

Status: Closed - Implemented

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Secretary of Labor should strengthen management control over the planning, implementation, and evaluation of the investigating process for sheltered workshops' compliance with the requirements of the Fair Labor Standards Act by: (1) requiring regional and area offices to specify a level of staff resources for making workshop investigations; and (2) designating specific compliance officers in each regional or area office to develop expertise for making workshop investigations.

Agency Affected: Department of Labor

Status: Closed - Implemented

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Secretary of Labor should establish management controls for ensuring that sheltered workshop investigations are made on a uniform basis nationwide. Each investigation should include all analyses needed to determine a workshop's compliance with the Fair Labor Standards Act's requirements, including examinations of the: (1) production standards used for establishing piece rates; (2) productivity evaluations used for establishing hourly wage rates; (3) procedures used to determine and document prevailing wage rates; (4) systems used to develop and maintain individual productivity records, time studies, performance evaluations, and records of total hours worked; and (5) procedures used for increasing individual wage payments to comply with the terms and conditions of a special certificate.

Agency Affected: Department of Labor

Status: Closed - Implemented

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Chairman of the Committee for Purchase from the Blind and Other Severely Handicapped should establish procedures for verifying the accuracy of the reports submitted by the workshops for the number of direct labor hours worked by handicapped and nonhandicapped workers.

Agency Affected: Committee for Purchase from the Blind and Other Severely Handicapped

Status: Closed - Implemented

Comments: In July 1985, the Committee established and implemented procedures for reviewing the adequacy of the commission rate.

Recommendation: The Chairman of the Committee for Purchase from the Blind and Other Severely Handicapped should establish procedures for evaluating the adequacy of the commission rate and the commissions received by the central nonprofit agencies.

Agency Affected: Committee for Purchase from the Blind and Other Severely Handicapped

Status: Closed - Implemented

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Chairman of the Committee for Purchase from the Blind and Other Severely Handicapped should revise the federal regulations and Committee procedures to require that each participating sheltered workshop submit information on the estimated direct labor hours for handicapped and nonhandicapped workers for each action proposing the addition to the procurement list of a product or group of products or a service.

Agency Affected: Committee for Purchase from the Blind and Other Severely Handicapped

Status: Closed - Implemented

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Chairman of the Committee for Purchase from the Blind and Other Severely Handicapped should revise the federal regulations and Committee procedures to require that each participating sheltered workshop report the placements into competitive employment attributable to the employment opportunities created by the Javits-Wagner-O'Day Program.

Agency Affected: Committee for Purchase from the Blind and Other Severely Handicapped

Status: Closed - Implemented

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Chairman of the Committee for Purchase from the Blind and Other Severely Handicapped should establish a system for monitoring the percentage of total direct labor hours performed by handicapped and nonhandicapped workers in each participating workshop in the production of commodities or the provision of services under the Javits-Wagner-O'Day Program. As a minimum, the system should require that each participating sheltered workshop submit information in its annual report showing the total direct labor hours for handicapped and nonhandicapped workers for all products produced or services provided to the federal government under the Javits-Wagner-O'Day Program.

Agency Affected: Committee for Purchase from the Blind and Other Severely Handicapped